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Introduction

Thank
you for purchasing this Real Estate Exam Prep. book. We hope you will
learn a great deal from our study guide and that you will study well
and pass your exam. It is our purpose to provide you with the most up
to date information for your state real estate exam. We have made
every effort to present this material as the closest possible example
to what you will see on your actual state exam. At times, it will
appear to be exactly what you will see on the exam. We have tried
very hard to make this book as error and typo free as possible.
However, we are not without our faults. Real estate exam material and
the real estate exams change rapidly and we are continuously updating
this book as these changes occur. You may find a typo here and there,
but do not be alarmed. We assure you that if you find one, it will be
obvious and it will not prevent you from being able to tell what the
correct answer is.

You
will find that after you have studied this material as instructed in
the How
to Use this Guide Effectively,
you will discover that this is all you need to pass the real estate
exam. There are many real estate schools out there such as Allied
Real Estate School, Anthony Real Estate School and Kaplan that,
although they are good schools, also offer exam cram or exam
preparation materials, but are extremely overpriced. Their materials
can cost into the $100 and $300 ranges and provide a lot of extra
“fluff” material that will not help you pass the exam and will
waste your time. This book offers all the same materials in a
condensed and precise manner with no fluff. Once you have taken the
department of real estate certified classes and passed them,
qualified to for a state exam date then you do not need those
classroom materials anymore. All you will need are the answers to the
state and national real estate exam questions. Study those, nothing
else, memorize them, and you will pass your exam on the 1st
try. There is no need to buy expensive materials from other schools,
no need to sit in live exam cram courses, and there is no need for
the Real Estate Exam for Dummies books. We have been offering this
material to thousands of licensees for over 10 years with a
tremendous amount of positive reviews and feedback.

Please
be aware that the materials in this book including any bonus item you
have received with this book are copyrighted. No part of this book in
part or in whole may be duplicated, distributed or resold without
consent of the publishers. Our staff actively searches the internet
everyday for sales of real estate media on thousands of websites and
online auctions. If our program is found being copied, distributed or
resold we will prosecute to the fullest extent of the law.

How To Use This Guide Effectively

Here
you will find tried and true steps to help you use this guide
effectively and to get the best results while minimizing your study
time. Please understand that as you go through the real estate
questions we have prepared for you, you may come across a few that
you have never seen before. Do not be alarmed. These are questions
that are on the state exam, but were never given to you in the real
estate class you took or in your class textbooks. This is why there
is such a high failure rate for the real estate exam. The actual
questions on the state or national real estate exams are NOT created
by the same agency that created the college courses or text books.
These college courses are designed by regional college accreditation
agencies and the state real estate exams are created by the
individual state’s department of real estate or real estate
commissions. It is very frustrating, we know. That is why there
publishers like us who create exam cram courses and applications to
“bridge the gap” of knowledge for the real estate exams.

STEP
1: Read
and understand the VOCABULARY section first. These are very
important terms. The key to successful knowledge of real estate is
understanding and knowing the vocabulary used. Review them until you
are confident to go onto the questions. Do not continue to the
questions until you know these terms well.

STEP
2: Now
go to the STUDY SECTION and read all the real estate questions with
their correct answers and explanations in each exam. There are a lot
of questions. Pace yourself and allow time to understand and memorize
the correct answers.

STEP
3: Go
back to the VOCABULARY section and review. Again, they are VERY
important. You must know these forwards and backwards.

STEP
4: Repeat
step 2 until you feel you are scoring 90% or better. Then review the
VOCABULARY section again.

STEP
5: Now
begin the MATH only portion of the STUDY SECTION. Read the questions
with the answers and explanations until you have mastered them just
as you did with the regular real estate questions. Make sure you set
aside a separate time of the day to ONLY study the math. The reason
for this is that the analytical/math function of the human brain
works on math problems from different areas of the brain than word
problems. When studying it takes approx. 10 min. for the brain to
fully switch to a pure analytical/math function. If you are studying
word problems and math problems in the same study session, you will
be wasting a lot of time and overworking your brain. Time is key
here, especially when it comes to the day of the exam, more about
that later.

STEP
6: Repeat
the MATH ONLY portion in the STUDY SECTION until you feel you are
scoring at least 90% or better.

STEP
7: Now
you are ready to go on to the TEST SECTION of this book. These
questions will simulate what you will find on the actual state exam.
You will have a limited time to complete the exam. Set a timer to the
amount of time that your state allows for you to complete the state
exam. Begin taking one of the exams and write your answers on a blank
sheet of paper. When you are finished, check your answers with the
answers with the correct answers of the same exams shown in the STUDY
SECTION and score yourself. Now continue to Step 8.

STEP
8: Did
you score 90% or better? If so, congratulations! You are ready to
take the actual state exam and pass on your first try. If you did not
score 90% or better, review the questions you missed using the STUDY
SECTION. Study them, and retake the corresponding exam in the TESTING
SECTION. Continue doing this and review the Vocabulary, if needed,
until you are scoring 90% or better.

IMPORTANT!!!

REMEMBER
THIS ON THE DAY YOU TAKE YOUR STATE EXAM…

DO
NOT ANSWER, OR EVEN READ, THE FIRST 5 QUESTIONS OF THE EXAM. DO THOSE
SECOND TO LAST AND ANY MATH RELATED QUESTIONS, VERY LAST!!!

Write
the numbers to these questions on a piece of paper to remember to do
them later. The reason is that they have placed the hardest questions
in the first 5 spots to distract you, make you nervous and frustrated
while taking the test. So, do those just before doing the math
questions. Do the math questions very last because as we explained
earlier, psychologically it takes the brain about 5-10 minutes to go
from comprehensive thinking to analytical mathematical thinking. You
only have a limited amount of time to complete the real estate exam.
Therefore, your time will be very valuable. Do not leave any question
unanswered. An unanswered question will be scored as a wrong answer.

Be
sure to read the section “Secrets
to Passing the Real Estate Exam” this
section was developed by ex-real estate exam proctors. It will give
you more detailed steps and inside information on how to use the
above method on the day of your exam. It will also show you how to
answer a question correctly even if you have completely forgotten the
answer.

Good
luck and study well!

Real Estate Vocabulary

Due
to the length of this Real Estate Glossary, we have included it as a
link below. Please understand these are general real estate terms
used in almost every state. This is here for review purposes and
reference only.

Study Section

In
this section you will have the Real Estate Vocabulary Exam, Virginia
Real Estate Exam and Real Estate Math Exam. Read through all the
questions in each exam according to the How
to Use this Guide Effectively
chapter and ONLY look at the correct answers in each exam. Start with
the Vocabulary Exam and read question number one and then read ONLY
the correct answer immediately. Continue to do this for each question
until you have read all the questions in the first exam. If you go
through each exam 3-4 times in this manner, you will then be able to
recognize the correct answer right away when it comes to taking the
actual exam. If your reading device has the ability to highlight the
correct answer in each question, please utilize this feature. It will
make it a little easier each time when reading through the exams in
this section.

Real Estate Vocabulary Exam

Please
understand these are general real estate terms used in almost every
state. This is here for practice and review purposes only. Some terms
may not be on your exam.

1.
Which of the following describes the term “appreciation”?

A. Kind
words expressed to someone about something they didB. An increase
in the value of propertyC. An item of value owned by an
individualD. None of the above

Answer:
B. Appreciation is the increase in the value of a property due to
changes in market conditions, inflation, or other causes.

2.
When ownership of a mortgage is transferred from one company or
individual to another, it is called

A. an
assumptionB. an assignmentC. an assessmentD. all of the
above

Answer:
B. When ownership of a mortgage is transferred (assigned) from one
company or individual to another, it is called an assignment.

3.
A mortgage loan which requires the remaining balance be paid at a
specific point in time is called a/an

Answer:
A. A mortgage loan that requires the remaining principal balance be
paid at a specific point in time is a balloon mortgage.

4.
The following reason accounts for why bridge loans are not used much
anymore:

A. More
second mortgage lenders now will lend at a high loan to
valueB. Sellers would rather accept offers from Buyers who have
already sold their propertyC. Neither A or B D. Both A and
B

Answer:
D. Bridge loans are not used much anymore because more second
mortgage lenders now will lend at a high loan to value and sellers
often prefer to accept offers from buyers who have already sold their
property.

5.
A title which is free of liens or legal questions as to ownership of
the property is called a __________
title.

A. goodB. cloudyC. clearD. free

Answer:
C. A title free of liens or legal questions as to ownership of the
property is called a clear title. It is clear because there can be no
challenges made to its legality.

6.
What is the collateral in a home loan?

A. The
property itselfB. A person’s good nameC. The amount of
savings a person hasD. The current automobile the person
owns

Answer:
A. The property itself is the collateral, and the borrower risks
losing it if he does not repay according to the terms of the mortgage
or deed of trust.

7.
The adjustment date on an adjustable-rate mortgage is

A. the
date the interest rate changesB. the date the stock market goes
upC. 30 days from the date the mortgage was taken outD. all
of the above

Answer:
A. The adjustment date is the date the interest rate changes
(adjusts).

8.
What is the deposit made by a potential buyer to show he is serious
about buying a house called?

Answer:
B. The deposit made by a potential buyer to show they are in earnest
about purchasing a house is called an earnest money deposit.

9.
A right-of-way which gives persons other than the owner access to or
over a property is known as
an

A. easementB. ingressC. egressD. none
of the above

Answer:
A. An easement is a right-of-way to persons other than the owner and
gives them legal access.

10.
Which best describes a “subdivision”?

A. Houses
in the same neighborhood similar in style and sizeB. A housing
development created by dividing a tract of land into individual
lotsC. A development which is “substandard”D. None of the
above

Answer:
B. A subdivision consists of individual lots created from a larger
tract (subdivided) and are offered for sale or lease.

11.
When someone contributes to the construction or rehabilitation of a
property with labor or services rather than cash, that contribution
is called

A. a
personal contributionB. sweat equityC. a big help to the
contractorsD. toil and labor

Answer:
B. Sweat equity is the contribution to the construction of or
rehabilitation of a property in the form of labor or services rather
than cash.

12.
A two-step mortgage is defined as

A. an
adjustable rate mortgage with one interest rate for the first five or
seven years and a different rate for the remainder of the term.B. a
mortgage which is both adjustable and fixedC. a mortgage which is
named after a dance stepD. all of the above

Answer:
A. A two-step mortgage starts out with one rate for the first five or
seven years and then changes to a different rate for the remainder of
the term of the mortgage amortization.

13.
A legal document evidencing a person’s right to or ownership of a
property is called a:

A. quitclaim
deed B. titleC. yearly leaseD. accurate appraisal

Answer:
B. A title is a legal document evidencing a person’s right to or
ownership of a property.

14.
If you were buying a house that included furnishings, you would
receive a written document transferring title to the personal
property. This document is called a/an

A. title B. deedC. bill
of saleD. evidence of payment

Answer:
C. A bill of sale is a written document that transfers personal
property from one owner to another.

15.
An oral or written agreement that is binding in a court of law is
called a:

A. gentlemen’s
agreementB. contractC. business dealD. promissory
note

Answer:
B. A contract can be oral or written and is binding in a court of
law.

16.
The part of the purchase price of a property that the buyer pays in
cash and does not finance with the mortgage is called
the

A. deposit B. second
mortgageC. down payment D. deed of trust

Answer:
C. The down payment is the amount paid down in cash as the initial
upfront portion of the total amount due. It is usually given in cash
at the time of finalizing the transaction.

17.
A female named in a will to administer an estate is called
an

A. executorB. executrixC. individual
representativeD. able inheritor

Answer:
B. The female executor named in a will to administer an estate is
called an executrix.

18.
The greatest possible interest a person can have in real estate is
called

A. fee
complexB. fee simpleC. no additional
feesD. ownership

Answer:
B. The greatest possible interest a person can have in real estate is
called fee simple.

19.
Required for properties located in federally designated flood areas,
this type of insurance compensates for physical property damage
resulting from flooding. It is called

A. It
is guaranteed by the Department of Veterans Affairs (VA)B. It is
guaranteed by the Rural Housing Service (RHS)C. It is insured by
the Federal Housing Administration (FHA)D. All of the
above

Answer:
D. Government loans are either insured by FHA, guaranteed by VA or
RHS. Mortgages that are not government loans are called conventional
loans.

21.
The person conveying an interest in real property is called

A. the
buyerB. the granteeC. the grantorD. the
mortgagor

Answer:
C. The grantor is the person conveying an interest in real property
to another party.

22.
Insurance that covers in the event of physical damage to a property
from fire, wind, vandalism, or other hazards is called

A. act
of God insuranceB. hazardous insuranceC. hazard
insuranceD. there is no such insurance

Answer:
C. Insurance covering physical damage to a property from fire, wind,
vandalism, or other hazards is called hazard insurance.

23.
A liquid asset is

A. an
asset which is not in solid formB. an asset which cannot be
frozenC. a cash asset or an asset easily turned into cash D. an
asset that is hard to get to

Answer:
C. A liquid asset is either cash or something easily turned into
cash.

24.
Another term for the lender in a mortgage agreement is
the

A. bankerB. mortgageeC. mortgagorD. private
mortgage company

Answer:
B. The mortgagee is the lender.

25.
If you are buying a house and asking the Seller to provide all or
part of the financing, you are asking for _________
financing.

A. specialB. ownerC. personal D. non-bank

Answer:
B. When the Seller provides all or part of the financing it is called
owner financing.

26.
A point is

A. the
part of the pen you sign a contract withB. a score in a
basketball gameC. the reason for telling the storyD. 1% of
the amount of the mortgage

Answer:
D. A point is 1% of the amount of the mortgage.

27.
What does a power of attorney grant someone?

A. The
ability to attend law schoolB. Complete or limited authority on
behalf of someone elseC. Complete control over which medical
facility someone uses D. The right to inherit an estate

Answer:
B. A power of attorney derives power from a legal document and grants
someone complete or limited authority on behalf of someone.

28.
The principal is

A. the
amount borrowed or remaining unpaidB. part of the monthly payment
that reduces the remaining balance of a mortgageC. an ethic or
valueD. both A and B

Answer:
D. The principal is the amount borrowed or remaining unpaid, as well
as the part of the monthly payment that reduces the remaining balance
of a mortgage.

29.
A promissory note is

A. a
written promise to repay a specified amount over a specified period
of timeB. an oral promise to repay a specified amount over a
specified period of time C. a note passed back and forth in
classD. a note you deliver to another telling them of your
intentions

Answer:
A. A promissory note is a written promise to repay a specific amount
over a specified period of time.

30.
Which of the following best describes a real estate agent?

A. A
licensed person who negotiates and transacts the sale of real
estateB. The owner of a real estate firmC. A person who
negotiates and transacts the sale of real estate but is not
licensedD. A person who sells both property and
insurance

Answer:
A. A real estate agent is a licensed person who negotiates and
transacts the sale of real estate.

31.
When does an assumption take place?

A. When
someone believes something and it turns out to be trueB. When the
buyer assumes the seller’s mortgageC. When the seller assumes
the buyer’s mortgageD. All of the above

Answer:
B. When the buyer assumes the seller’s mortgage is a transaction
called an assumption.

32.
A legal document conveying title to a property is called
a/an

A. sales
contractB. option to purchaseC. deedD. contract for
deed

Answer:
C. A deed is a legal document conveying title to property.

33.
If you have a loan and transfer the title to another individual
without informing the lender, it is likely that the lender will
demand payment of the outstanding loan balance. He is able to do
this because of a clause in your mortgage called the

A. due
on demand clauseB. acceleration clauseC. amortization
scheduleD. both A and B

Answer:
B. An acceleration clause allows the lender to demand payment, most
commonly if the borrower defaults on the loan or transfers title to
someone without informing the lender.

Answer:
C. The most common type for an individual is a “Chapter 7 No Asset”
bankruptcy, which relieves the borrower of most types of debts.

35.
Which of the following best describes a “broker”?

A. Someone
who owns a real estate firm B. Some real estate agents working
for brokersC. Someone who acts as an agent and brings two parties
together for a transaction and earns a fee for thisD. All of the
above

Answer:
D. A broker can own a real estate firm, work for another broker who
owns the firm, broker loans in the mortgage industry, but basically
is defined as anyone who acts as an agent, bringing two parties
together for any type of transaction and earns a fee.

36.
A normal contingency in a real estate contract would be that
the

A. purchaser
is able to obtain a satisfactory home inspection from a qualified
inspector.B. seller is allowed to come back and spend 2 weeks in
the house each year C. purchaser is able to have occupancy as
soon as the sales contract is signed D. seller is allowed to dig
up some of the landscaping and take it with him

Answer:
A. A normal contingency in a sales contract would be that the
purchaser is able to obtain a satisfactory home inspection from a
qualified inspector. This condition has to be met before the
contract is legally binding.

37.
If you go to a bank or mortgage company to apply for a home, what
type of mortgage would you be applying
for?

A. GovernmentB. ConventionalC. AmericanD. Adjustable
rate

Answer:
B. Home loans which are not VA or FHA are called conventional
loans.

38.
A report of someone’s credit history which is prepared by a credit
bureau and used by a lender in the loan qualification process is
called a

Answer:
C. An improvement that intrudes illegally on another’s property is
called an encroachment. An easement would be a LEGAL intrusion.

43.
A government loan that is not a VA loan would be a/anA. FHA
mortgageB. FDA mortgageC. This type loan does not
existD. ARM mortgage

Answer:
A. A mortgage which is insured by the Federal Housing Administration
(FHA) and is the other type of government loan besides a VA loan is
an FHA mortgage.

44.
If you convey an interest in real property to a relative, that person
is known as the

A. receiverB. mortgagorC. granteeD. lucky
relative

Answer:
C. The person to whom an interest in real property is conveyed is the
grantee.

45.
You decide you want to buy a boat and you want to borrow against the
equity in your home. You would get a mortgage loan up to a specified
amount which is in second position to your first mortgage. This
arrangement is called a

A. perfectly
acceptable way to buy a boatB. leverage against your
houseC. home equity line of creditD. line of credit for
personal purposes

Answer:
C. A mortgage loan, usually in second position, which allows the
borrower to obtain cash drawn against the equity of his home, up to a
predetermined amount, is known as a home equity line of credit.

46.
You are your sister are joint tenants in a home your mother left you.
Your sister has three children in her will and you have one. If she
dies first, who does the property go to?

A. It
is divided equally between her three childrenB. It goes entirely
to youC. It is divided equally between her three children and
your oneD. It goes into her estate

Answer:
B. In the event of death in joint tenancy, the survivor owns the
property in its entirety.

47.
What is the best description of a lien?

A. Something
that doesn’t stand up straight in a houseB. Something that’s
illegalC. A legal claim against property that must be paid off
when it’s soldD. None of the above

Answer:
C. A lien, such as a mortgage or first trust deed, is a legal claim
against a property that must be paid off when it is sold.

48.
What is a lock-in?

A. A
gated community which locks the gate at midnightB. An agreement
from a lender guaranteeing a specific interest rate for a specific
time at a certain costC. What parents do with wayward
childrenD. A type of key available at most hardware
stores

Answer:
B. A lock-in is a rate guaranteed by the lender for a certain period
of time at a certain cost to the buyer.

49.
The right of a government to take private property for public use
upon payment of its fair market value. It is the basis for
condemnation proceedings.

A. Eminent
domainB. Governmental domainC. EncroachmentD. Both A and
B

Answer:
A. Eminent domain is the right of the government to take private
property for public use upon payment of its fair market value.

50.
A mortgage with a lien position subordinate to the first mortgage on
a piece of property is called a

A. second mortgageB. first subordinate
mortgageC. mortgage which isn’t legalD. lien position
mortgage

Answer:
A. A second mortgage is a mortgage with a lien position subordinate
to the first mortgage.

51.
An adjustable-rate mortgage, also known as an ARM is

A. one
in which the interest rate is fixed over timeB. one in which the
interest rate changes periodically, depending on index changesC. one
in which the interest rate changes periodically, depending on the
stock marketD. a type of mortgage that the mortgagor can adjust
himself

Answer:
B. An adjustable rate mortgage in one in which the interest rate
adjusts periodically, according to corresponding fluctuations in an
index.

52.
A schedule that shows how much of each payment will be applied to
principal and how much toward interest over the life of the loan is
called a/n

Answer:
A. An amortization schedule is a table showing how much of each
payment is applied to interest and how much to principal. It also
shows the gradual decrease of the loan balance until it reaches
zero.

53.
The term applied to a mortgage in which you make the payments every
two weeks, thereby making thirteen payments a year rather than
twelve. This mortgage is paid off faster than a normal
mortgage.

Answer:
C. A mortgage in which you make payments every two weeks instead of
once a month is called a bi-weekly mortgage.

54.
The limitation of how much an adjustable rate mortgage may adjust
over a six-month period, annual period, and over the life of the loan
is called
a

A. buy-downB. high pointC. top stopD. cap

Answer:
D. The limitation on how much the loan may adjust over a period of
time and for the life of the loan is a cap.

55.
When is a real estate transaction considered to be
“closed”?

A. When
the buyer has signed all the sales contractsB. When the closing
documents have been recorded at the local recorder’s officeC. When
all the documents are signed and money changes handsD. Both B and
C.

Answer:
D. In some states “closed” means when the documents are recorded
at the courthouse, and in others it is a meeting where the documents
are signed and money changes hands.

56.
A record of an individual’s repayment of debt, reviewed by mortgage
lenders in determining credit risk is called a

A. credit
affidavit B. credit historyC. there is no such
recordD. credit worthiness

Answer:
B. A record of an individual’s repayment of debt is called a credit
history.

57.
If you sell your property to a neighbor and the lender demands
repayment in full, this means you have a _________________ in your
mortgage.

Answer:
C. A provision in a mortgage which allows the lender to demand
repayment in full if the borrower sells the property that serves as
security for the mortgage is called a due-on-sale provision.

58.
The sum total of all the real and personal property owned by an
individual at time of death is called their

A. estateB. probateC. willD. all of the
above.

Answer:
A. The sum total of all the real and personal property owned by an
individual at time of death is called an estate.

59.
If you list your property with a real estate agent and sign a written
agreement that they are the only ones entitled to a listing for a
specific time you have given them an

A. exclusive listingB. exclusive right to
advertiseC. exclusive right to showD. inclusive
listing

Answer:
A. A written contract giving a licensed real estate agent the
exclusive right to sell a property for a specified time is called an
exclusive listing.

60.
Fair market value could be defined as

A. how
much a property is worth, determined by a realtor’s market
analysisB. the most a buyer, willing, but not compelled to buy,
would payC. the least a seller, willing, but not compelled to
sell, would takeD. both B and C

Answer:
D. Fair market value is the highest price that a buyer, willing but
not compelled to buy, would pay, and the lowest a seller, willing but
not compelled to sell, would accept.

61.
If a lender agrees to make a loan to a specific borrower on a
specific property, he has made a

A. decision to make the loanB. statement that both the
buyer and the property pass inspectionC. firm commitmentD. both
B and C

Answer:
C. A lender’s agreement to make a loan to a specific borrower on a
specific property is called a firm commitment.

62.
If you buy a house and build cabinets into the wall, then sell that
house, the cabinets stay because they have become a

A. type
of attachmentB. fixtureC. part of the houseD. none of the
above

Answer:
B. Personal property becomes real property when attached in a
permanent manner to real estate and is called a fixture.

63.
A home inspection is

A. a
thorough inspection by a professional which evaluates the structural
and mechanical condition of a propertyB. not required by
lawC. often a contingency in a contract that it turns out
satisfactorilyD. both A and C

Answer:
D. A home inspection is a thorough inspection by a professional that
evaluates the structural and mechanical condition of the property. A
satisfactory home inspection is often a contingency.

64.
An insurance policy which combines personal liability insurance and
hazard insurance coverage for a dwelling and its contents is
called

A. homeowner’s
insuranceB. buyer’s insuranceC. errors and omissions
insuranceD. all of the above

A. It
is an alternative financing optionB. Each month’s rent may also
consist of an additional amount applied toward the purchaseC. The
price is already set in the beginningD. All of the above

Answer:
D. A lease-option is an alternative financing option that allows home
buyers to lease a home with an option to buy. Each month’s rent
payment may consist of not only the rent, but an additional amount
which can be applied toward the down payment on an already specified
price.

66.
In simple terms, a sum of borrowed money (principal) usually repaid
with interest is called a

A. mortgageB. loanC. conventional loanD. alternative
mortgage

Answer:
B. A sum of borrowed money generally repaid with interest is simply a
loan.

67.
A property description which is recognized by law and is sufficient
to locate and identify the property without oral testimony is known
as the property’s

Answer:
C. A legal description describes the property and is recognized by
law. It is sufficient to locate and identify the property without
oral testimony.

68.
The date on which the principal balance of a loan, bond, or other
financial instrument becomes due and payable is called

A. its
due dateB. maturityC. end of the paper
trailD. delivery

Answer:
B. The date on which the principal balance of a loan, bond, or other
financial instrument becomes due and payable is called maturity.

69.
The person borrowing money in a mortgage agreement is called
the

A. mortgagorB. mortgageeC. borrowerD. lessee

Answer:
A. The borrower in a mortgage agreement is called the mortgagor.

70.
Which of the following is true about an origination fee?

A. It
applies to both government and conventional loans B. It is
usually 1% on a government loanC. It is usually 2% on a
conventional loanD. Both A and B

Answer:
D. Origination fees apply to government and conventional loans. A
government loan origination fee is one percent of the loan amount,
but additional points may be charged which are called “discount
points”. In a conventional loan, the origination fee refers to the
total number of points a borrower has to pay.

71.
Which of the following falls under the term “personal
property”?

A. A
garage attached to a houseB. A sofaC. The front porch of a
homeD. The windows in a home

Answer:
B. Personal property is any property that is not part of the real
property. A, C, an D are all parts of the house.

72.
In some cases if a borrower pays off a loan before it is due he may
encounter a penalty called a

A. penalty for early withdrawalB. loan to value
penaltyC. prepayment penaltyD. there is never a penalty for
paying a loan off early

Answer:
C. A fee that may be charged to a borrower who pays off a loan before
it is due is known as a prepayment penalty.

73.
Which of the following statements is true regarding the term
“pre-approval”?

A. It
applies only to the propertyB. It is done before the loan
application is completeC. It s a loosely used termD. None of
the above

Answer:
C. Pre-approval is a loosely used term generally taken to mean a
borrower has completed a loan application and provided debt, income,
and savings documentation which an underwriter has reviewed and
approved.

74.
PITI reserves applies to

A. a
cash amount the borrower must have on hand after down payment and
closing Costs.B. an amount which is financed with the
mortgageC. both A and BD. none of the above

Answer:
A. PITI reserves must equal the cash amount that the borrower would
have to pay for principal, interest, taxes, and insurance for a
predefined number of months.

75.
Why would a public auction take place?

A. It’s
a good way to buy propertyB. To inform the public about property
for saleC. To help auctioneers get employmentD. To sell
property to repay a mortgage in defaults

Answer:
D. A public auction is a meeting in an announced public location to
sell property to repay a mortgage that is in default.

76.
The term “realtor” applies to

A. any
real estate agent who has passed the state examB. any real estate
agent whose license is activeC. any real estate agent who is a
member of a local real estate board affiliated with the National
Association of Realtors.D. any real estate agent who belongs to
his local board

Answer:
C. A realtor is defined as an agent, broker, or associate who holds
active membership in a local real estate board which is affiliated
with the National Association of Realtors.

77.
“Remaining term” refers to

A. the
remaining school term for a real estate classB. the original
amortization term minus the number of payments that have been
applied C. the months left in a pregnancyD. all of the
above

Answer:
B. The remaining term applies to the original amortization term minus
the number of payments that have been applied.

78.
Which of the following is not true of a “revolving debt”?

A. It
is a type of credit arrangement, like a credit cardB. It revolves
around no interest for the first six monthsC. A customer borrows
against a pre-approved line of creditD. The customer is billed
for the amount borrowed plus any interest due

Answer:
B. Revolving debt is a credit arrangement, such as a credit card,
which allows a customer to borrow against a pre-approved line of
credit when purchasing goods and services. The borrower is billed
for the amount that is actually borrowed plus any interest due.

79.
Which of the following does a survey not show?

A. Precise
legal boundaries of a propertyB. Location of improvements,
easements, rights of way C. EncroachmentsD. Location of
furnishings within the dwelling

Answer:
D. A survey is a drawing or map showing the precise legal boundaries
of a property, the location of improvements, easements, rights of
way, encroachments, and other physical features.

80.
What is meant by “seller carry-back”?

A. The
seller physically carries his furnishings out of the house on the day
of closingB. The seller agrees to be on the mortgage with the
buyerC. the seller provides financing, often in combination with
an assumable mortgageD. The seller carries the principal, but not
the interest on a loan

Answer:
C. A seller carry-back is an agreement in which the owner of a
property provides financing, often in combination with an assumable
mortgage.

81.
A title company is one which

A. is
usually not needed in a real estate transactionB. is not called
upon until one year after the sale is closedC. specializes in
examining and insuring titles to real estateD. specializes in
preparing deeds and deeds of trust

Answer:
C. A title company specializes in examining and insuring titles to
real estate.

82.
A state or local tax which is payable when title passes from one
owner to another is called a

A. title
taxB. transfer taxC. revenue stampsD. real estate
tariff

Answer:
B. State or local tax payable when title passes from one owner to
another is called a transfer tax.

83.
What is Truth-in-Lending?

A. A
state law requiring lenders to fully disclose in writing all terms
and conditions of a mortgageB. A federal law requiring lenders to
fully disclose in writing all terms and conditions of a mortgageC. A
local law requiring lenders to fully disclose in writing all terms
and conditions of a mortgageD. None of the above

Answer:
B. Truth-in-Lending is a federal law requiring lenders to fully
disclose in writing the terms and conditions of a mortgage, including
the annual percentage rate and other charges.

84.
A VA mortgage

A. is
a conventional mortgage for the state of VirginiaB. is guaranteed
by the Department of Veterans AffairsC. originates in Texas but
ends up in VirginiaD. in available to anyone applying for a
mortgage

Answer:
B. A VA mortgage is guaranteed by the Department of Veterans
Affairs.

85.
Which of the following is not true of “amortization”?

A. Over
time the interest portion increases as the loan balance
decreasesB. Over time the interest portion decreases as the loan
balance decreasesC. Over time the amount applied to principal
increases so the loan is paid off in the specified time D. None
of the above

Answer:
A. The loan payment consists of a portion which will be applied to
pay the accruing interest on a loan, with the remainder being applied
to the principal. Over time the interest portion decreases as the
loan balance decreases and the amount applied to principal increases
so that the loan is paid off (amortized) in the specified time.

86.
The valuation placed on property by a public tax assessor for
taxation purposes is called

A. real
valueB. fair market valueC. assessed valueD. predicted
value

Answer:
C. The valuation placed on property by a public tax assessor for
purposes of taxation is called assessed value.

87.
If a veteran is eligible for a VA loan, he or she would receive a
document from the VA called

Answer:
D. A certificate of eligibility is a document issued by the Veteran’s
Administration that certifies a veteran’s eligibility for a VA
loan.

88.
Which of the following usually earns the largest commissions in a
real estate transaction?

A. AttorneysB. RealtorsC. Loan
officersD. Home warranty companies

Answer:
B. Realtors generally earn the largest commissions, followed by
lenders.

89.
An unwritten body of law based on general custom in England and used
to an extent in some states is called

A. common
lawB. uncommon lawC. casual lawD. it isn’t law if it’s
not written down

Answer:
A. An unwritten body of law based on general custom in England and
used to an extent in some states is called common law.

90.
If a real estate agent is trying to determine the market value of a
property, one thing they would use is recent sales of similar
properties or

A. neighbors’
estimates of the value of the propertyB. records from several
years back in the same neighborhoodC. comparable salesD. sales
they estimate to happen in the future

Answer:
C. Recent sales of similar properties in nearby areas and used to
help determine the market value of a property are called comparable
sales, or “comps.”

91.
A person to whom money is owed is known as a

A. debtorB. creditorC. mortgageeD. lender

Answer:
B. A creditor is a person to whom money is owed.

92.
Discount points refer to

A. a
system of figuring out how much the property will be
discountedB. points paid in addition to the one percent loan
origination feeC. usually only FHA and VA loansD. both B and
C

Answer:
D. This term is usually used in reference to only government loans
(FHA and VA). Discount points are any points paid in addition to the
one percent loan origination fee.

93.
Which of the following can the Equal Credit Opportunity Act (ECOA)
not discriminate against?

A. Race,
color or religion B. National originC. Age, sex, or marital
statusD. All of the above

Answer:
D. ECOA is a federal law requiring lenders and other creditors to
make credit equally available without discrimination based on race,
color, religion, national origin, age, sex, marital status, or
receipt of income from public assistance programs.

94.
An exclusive listing is one which gives a licensed real estate agent
the exclusive right to sell a property

A. until
it sellsB. until the owner takes it off the marketC. for a
specified period of timeD. none of the above

Answer:
C. An exclusive listing gives a licensed real estate agent the
exclusive right to sell a property for a specified period of time.

95.
Which of the following is true about Fannie Mae’s Community Home
Buyer’s Program?

A. It
is an income-based community lending modelB. It has flexible
underwriting guidelines to increase low to moderate income family’s
buying powerC. Borrows who participate must attend pre-purchase
home-buyer education sessionsD. All of the above

Answer:
D. Fannie Mae’s Community Home Buyer’s Program is an income-based
community lending model, under which mortgage insurers and Fannie Mae
offer flexible underwriting guidelines to increase a low or moderate
income family’s buying power and to decrease the total amount of
cash needed to purchase a home. Participating borrows are required to
attend pre-purchase home-buyer education sessions.

96.
The mortgage that is in first place among any loans recorded against
a property and usually refers to the date in which loans are
recorded, but not always, is calleda

A. primary
mortgageB. first in line mortgageC. first mortgageD. both
A and B

Answer:
C. The mortgage that is in first place is a first mortgage.

97.
The legal process by which a borrower in default under a mortgage is
deprived of his or her interest in the mortgaged property is called
a

Answer:
C. The legal process by which a borrower in default under a mortgage
is deprived of his or her interest in the mortgaged property is
called a foreclosure.

98.
Loans against 401K plans are

A. not
allowed for down payments on propertyB. an acceptable source of
down payment for most types of loansC. too great a risk for most
people to takeD. only allowed if you’re accumulated $50,000 in
the plan

Answer:
B. Some administrators of 401(k)/403B plans allow for loans against
the monies you have accumulated in these plans. Loans against 401k
plans are an acceptable source of down payment for most types of
loans.

99.
A late charge is

A. the
penalty a borrower pays when a payment is late a stated number of
daysB. usually put into play when the payment is fifteen days
late on a first mortgageC. usually not applicable to most
peopleD. both A and B

Answer:
D. A late charge usually kicks in after fifteen days on a first
mortgage and is a penalty a borrower must pay.

100.
A person’s financial obligations are known as
his

A. paymentsB. assetsC. liabilitiesD. credit
risks

Answer:
C. A person’s financial obligations are called liabilities and
include long-term and short-term debt and any other amounts owed to
others.

101.
Which of the following is not true of annual percentage rate
(APR)?

A. It
is the note rate on your loanB. It is not the note rate on your
loanC. It is a value created according to a government formula
intended to reflect the true cost of borrowing and expressed as a
percentageD. It is always higher than the actual note rate on
your loan

Answer:
A. Annual percentage rate is not the note rate on your loan. It is a
value created according to a government formula intended to reflect
the true annual cost of borrowing, expressed as a percentage. The
APR is always higher than the actual note rate on your loan.

102.
An individual qualified by education, training, and experience to
estimate the value of real property and personal property and who
usually works independently is called an

A. estimator
of valueB. appraiserC. on-site
inspectorD. underwriter

Answer:
B. An appraiser is an individual qualified by education, training,
and experience to estimate the value of real and personal property.
Some work for lenders, but most are independent.

103.
Which of the following best describes a “balloon
payment”?

A. Payment
delivered with a “bang”B. First of many payments on a
mortgageC. The final lump sum payment due at the termination of a
balloon mortgageD. Payments which go higher and higher each
year

Answer:
C. A balloon payment is the final lump sum payment due at the
termination of a balloon mortgage.

104.
When a borrower refinances his mortgage at a higher amount than the
current loan balance with the intention of pulling out money for
personal use, it is referred to as a

Answer:
B. A cash-out refinance is when a borrow refinances his mortgage at a
higher amount than the current loan balance because he wants to pull
our money for personal use.

105.
A certificate of deposit is

A. the
same as a down paymentB. a liquid assetC. a deposit held in a
bank paying a certain amount of interest to the depositor over a
certain timeD. a deposit held in a bank which pays double the
amount of normal interest over time

Answer:
C. A certificate of deposit is a time deposit held in a bank which
pays a certain amount of interest to the depositor.

106.
Common area assessments are

A. sometimes
called Homeowners Association FeesB. paid by individual owners of
condominiums or planned unit developmentsC. used to maintain the
property and common areasD. all of the above

Answer:
D. Common area assessments are also sometimes called Homeowners
Association Fees and are paid by the individual owners of condos or
planned unit developments and are used to maintain the property and
common areas.

107.
A short-term interim loan for financing the cost of construction is
called a

Answer:
C. A short-term interim loan for financing the cost of construction
is called a construction loan. The lender makes payments to the
builder at periodic intervals as the work progresses.

108.
In simple terms, debt is

A. credit
extended to someoneB. an amount owed to anotherC. an amount
owed to another with interestD. repayable

Answer:
B. Debt is an amount owed to another

109.
Which of the following is not true of the term “depreciation”?

A. It
is a decline in the value of propertyB. It is an accounting term
showing the declining monetary value of an assetC. It is a true
expense where money is actually paidD. Lenders add back
depreciation expense for self-employed borrowers and count it as
income

Answer:
C. Depreciation is not a true expense where money is actually paid.
It is a decline in the value of property and an accounting term
showing the declining monetary value of an asset. Lenders add back
depreciation expense for self-employed borrowers and count it as
income.

110.
Which of the following would not be paid by escrow
disbursements?

A. convictionB. divorce
from bed and boardC. evictionD. there is no way to lawfully
remove an occupant from real property

Answer:
C. The lawful expulsion of an occupant from real property is called
eviction.

112.
If you have a loan in which the interest rate does not change during
the term of the loan you have a _____________
mortgage.

A. fixed-rateB. conventional
fixed-rateC. owner financingD. all of the above

Answer:
A. A loan in which the interest rate does not change during the term
is called a fixed-rate mortgage.

113.
The following is true of a Home Equity Conversion Mortgage
(HECM).

A. It
is also known as reverse annuity mortgageB. You don’t make
payments to the lender, the lender makes payments to you C. It
enables older homeowners to convert their equity into cashD. All
of the above

Answer:
D. Usually called a reverse annuity mortgage, this mortgage is unique
in that instead of making payments to a lender, the lender makes
payments to you, allowing older homeowners to convert their equity to
cash. The loan does not have to be repaid until the borrower no
longer occupies the property.

114.
A written agreement between property owner and tenant stipulating the
conditions under which the tenant may possess the property for a
specified period of time and the payment due is called
a/an

A. contractB. optionC. leaseD. lease-option

Answer:
C. A written agreement between property owner and tenant laying out
the terms of the agreement including payment and period of time is
called a lease.

115. A
lender is

A. the
firm making the loanB. the individual representing the firm
making the loanC. the individual offering owner financingD. both
A and B

Answer:
D. A lender is the firm making the loan or an individual representing
the firm making the loan.

116.
A margin is

A. a
measurement of errorB. an artificial line not to write in on a
loan documentC. both A and BD. the difference between the
interest rate and the index on an adjustable rate mortgage

Answer:
D. A margin is the difference between the interest rate and the index
on an adjustable rate mortgage which remains stable over the life of
the loan.

117.
Which of the following is the best definition of a mortgage
broker?

A. A
mortgage company which originates loans, then places with other
lending institutionsB. A mortgage company which originates loans,
then keeps them in houseC. An individual which originates loans,
then sells on the secondary marketD. Much like a real estate
broker, receives a commission on loans

Answer:
A. A mortgage broker is a mortgage company which originates loans,
then places with a variety of other lending institutions with whom
they usually have pre-established relationships.

118.
The term “note rate” refers to:

A. the
speed at which a musician plays scalesB. the interest rate stated
on a mortgage noteC. the interest rate stated on a personal
loanD. the rate at which a note is amortized

Answer:
B. A payment insufficient to cover the scheduled monthly payment on a
mortgage loan is a partial payment, normally not accepted by the
lender, but in times of hardship a borrower can make a request of the
loan servicing collection department.

A. An
amount paid to reduce the interest on a loan before the due
dateB. An amount paid to reduce the principal on a loan before
the due dateC. Can result from a sale, owner’s decision to pay
off the loan, or foreclosureD. Both B and C

Answer:
D. A prepayment reduces the principal on a loan before the due date
and can result from a sale, the owner’s decision to pay off the
loan early, or foreclosure.

123.
What is private mortgage insurance?

A. Mortgage
insurance that is arranged for by the buyer privately

B. Mortgage
insurance provided by a private mortgage insurance
companyC. Insurance required for loans with a loan-to-value
percentage in excess of 80%D. Both B and C

Answer:
D. A prepayment reduces the principal on a loan before the due date
and can result from a sale, the owner’s decision to pay off the
loan early, or foreclosure.

124.
If you were trying to buy a home you and the seller would need to
sign a written contract called a/an

A. purchase
agreementB. down payment agreementC. option to
purchaseD. all of the above

Answer:
A. A written contract signed by buyer and seller stating the terms
and conditions under which a property will be sold is called a
purchase agreement.

125.
What is a recorder?

A. A
public official who keeps records of real property
transactionsB. The county clerkC. The registrar of
deedsD. All of the above.

Answer:
D. A recorder is a public official who keeps records of real property
transactions in their area and is also known by the names “county
clerk” and “registrar of deeds”.

126.
The principal balance on a mortgage is

A. the
outstanding balance of principal and interestB. the outstanding
balance of principal onlyC. the amount the mortgage has been paid
downD. none of the above

Answer:
B. The principal balance is the outstanding balance of principal
only on a mortgage and does not include interest or any other
charges.

127.
Which of the following is not true about qualifying ratios?

A. There
are two types of ratios—“top” or “front” and “back” or
“bottom”B. The “top” ratio is a calculation of the
borrower’s monthly housing costs (principal, taxes, insurance,
mortgage insurance, homeowners’ association fees) as a percentage
of monthly incomeC. the “back” ratio includes all monthly
costs as well as “back” taxesD. Both calculations are used in
determining whether a borrower can qualify for a mortgage

Answer:
C. The “back” or “bottom” ratio includes housing costs as
well as all other monthly debt.